The Conservative Argument for Obamacare

The most under-appreciated aspect of the Affordable Care Act (aka Obamacare) is its adherence to what some might call "conservative" market principles.

Last week, I had a conversation with a conservative Washington, D.C.,
health care expert over the phone about Paul Ryan's Medicare plan. He
asked me to not attribute any direct quotes, so I'll sum up a snippet
of our conversation without identifying him.

I asked a question like this: The architects of the ACA scheduled
subsidies for the low-income to slow into the 2020s, just as the excise
tax grows for employer health care premiums within the upper-middle
class. As families across the country are more exposed to health care
costs, they'll join exchanges to buy cheaper insurance plans. This way,
the health care overhaul is explicitly designed to move us from an
employer-based system with huge subsidies to an exchange-based system
with smaller subsidies.

He answered this way: The administration is right that transparency,
accountability and cost-sharing are important principles for our health
care system. You can't find a sensible health policy analyst who would
disagree with those principles. But I think Obama goes too far with his
regulations. For example, the
insurance companies and providers are hamstrung by these superfluous
rules, like medical loss ratio, which treats sales people as an
unnecessary expense....

This metaphor is old but useful: Obamacare is a three-legged stool. To make health care universal, it has a universal mandate. To make the mandate affordable to low-income patients, it has subsidies (to help with costs) and regulations (mostly to help with access). Without one of those legs -- mandate, subsidies, and regulations -- the ACA wobbles.

If you simply do what Ponnuru and Levin propose [move away from a tax-subsidized employer model toward an open market where families buy insurance with tax credits from government], every insurance
company will be competing to make a product that's attractive to young
men with no chronic health problems and unappealing to everyone else.
To turn this idea into an idea that actually works for people with
medical needs you need to do three things. One, you need to prevent
firms from turning customers away because of their health status or
demographic characteristics. Two, you need some kind of regulatory
definition of the minimum benefits that need to be offered in order to
qualify as "health insurance" that's eligible for the tax credit. And
three, you need some kind of penalty for failing to enroll yourself in
a plan to ensure the existence of a viable risk pool. What you need, in
other words, is the Affordable Care Act and its
regulate/subsidize/mandate tripod structure.